The Marketing Budget

Setting and working to a budget is one of the key fundamental   components of the marketing infra structure.

Previously we have highlighted 4  crucial pillars of b-2-b marketing - the business model, the marketing plan, the budget and the CI Manual. Today we take a brief look at the marketing budget. The first obvious question is - do you have one? Even when there is no formal budget a historic record can probably be assembled by the accounts department tracing through invoices paid. At least this will give us some point of reference and highlight where money has been spent. And here is the first issue, that word spent. It implies a reactive, even negative cost incurred, why not approach the budget as making an investment. An investment that should demonstrate valid returns. If the company was investing in new production equipment for example, then the company directors would be expecting no less than a proposal that set out the benefits and return for that investment and judge this against other proposals competing for what are typically scarce resources.

The marketing budget holder will often be the marketing manager or marketing director and the scope might include staff salaries and employment costs, an allocation charge for floor space and overhead contribution,  marketing communications, travel expenses and intellectual property such as trademarks and patents. Clients often ask me what percentage of sales turnover should the marketing budget be? Well, this will be influenced by the scope - what's in and what's out - the nature of the business and what can be afforded.

 There are two ways of looking at this. To 'cost the need' - that is to outline the plan for staffing and marcomms judged appropriate to reaching the business's financial targets, or more likely decide how much can be afforded. Client/agency meetings provide the forum where such a disclosure is usually revealed.

In practical terms the next stage is to create the budget - a spreadsheet can be very useful and allow further  analysis. I  tend to use an application such as Exel or Numbers utilising features such as formulae and relational spreadsheets to do the number crunching and  comparisons. I find it useful to provide a line for every type of marketing activity, even though some will have a zero figure entered. Also build in a contingency for unexpected expenditure.  The MD is often good at signing you up for an exhibition you don't need but is in a location he would like to visit - but that's another story.

Finally having prepared and presented your marketing budget, monitor it versus 'actuals' and take the appropriate action if you are spending too much against the plan

Do you have lots of unused literature?

Delivering sales messages, specifications and documentation can generate of stack of print - but is print still the most appropriate medium?

Traditionally company, product and service information has been delivered as  printed documents. But even in its hay day piles of unused print stacked up in marketing offices and in the boots of reps cars. As more and more information is being delivered and consumed online, it makes sense to review the print budget. Firstly it is important to distinguish between the different process elements involved in producing a piece of print. Three main elements are 1) researching, writing, photographing and collating content, 2) design and 3) artwork for print - or for other media. Lets just consider these three items. Accurate and timely content is vital whatever the final form of delivery and so is design. Quality design is important as it subconsciously conveys an impression of the company itself that even people untutored in such matters will notice. But not all collateral now needs to be printed and even if designed for print might actually be delivered as a PDF for customers and prospects to download and choose whether or not to print at the point of delivery.  You might opt for digital print on demand which has the benefit of not just avoiding producing   surplus print, but allows for regular updates and customization. A newsletter or company magazine will typically have a known circulation perhaps with a bonus exhibition quantity. Other material however may be best integrated with web site content.

Traditionally there has been a hierarchy of print requirements that can be quite extensive and accordingly the 'print' or 'literature' budget can be a significant part of the marketing communications budget. A 'print' hierarchy could include:-

• Corporate brochure introducing the company and establishing credibility with new prospects.
• Sales literature introducing the benefits of the company products and differentiating them from competitors. These too might have a hierarchy from product ranges or families to individual products.
• White Papers and user guides placing products within a market and technology context.
• Product data and specifications providing performance and specification information.
• User, operation and installation manuals and documentation.

The list could be far more extensive and in reviewing budgets it is worth creating a hierarchy of information then deciding on how it will be used. For example is it important to control the quality to impress prospects in the early part of the sales process, in which case print could be the best option? Is technical data that is accurate and up to date what counts most, in which case a downloadable PDF might be the best option. Or is it an instruction leaflet packed wit the product where a simple black and white sheet perhaps with QR link to a video instruction or downloadable manual could be a preferred option?

As with other big ticket budget items such as advertising and exhibitions, it is time to review and reconstruct the print and literature budget as well.  

Marketing budgets must evolve

As marketing communications methods evolve, it is essential that marketing budgets change too.

With any client there are three essential documents that we ask for and if these do not exist then we make sure they are put in place, because without them it is difficult to run an effective marketing programme. The first essential document is the Marketing Plan. This sets out the objectives, strategies, rationale, an annual plan of activities and time-scales. The second is the Corporate Identity manual which describes how all forms of visual communication collateral should look for a consistent projection of brand and image. And the third document is the Marketing Budget. 

There are two aspects to budgets - the total amount and the mix. How the total amount is established is often a matter of some debate. Some people like to set this as a percentage of projected sales, but this lacks any real rationale as what works for one company may be entirely wrong for another. Ideally the marketing 'needs' should be determined and costed but this approach is rarely affordable, so a cap should be set balancing affordability with the ability to deliver on marketing goals. Just as there is no magic percentage figure, so dividing the budget up say, one third advertising, one third web and one third for all the rest, seems like a handy rule of thumb, but is far too crude a measure and does not allow for new evolving marketing channels and the content needed to supply them. Just as the marketing plan should allow flexibility to deal with changing circumstances, so the  budget mix should not be a constraint to recognising the benefits of new opportunities. Above all the marketing plan, CI and budget should be used to introduce a discipline and avoid runaway expenditure.

One clear requirement emerging from all the new channels is the need to budget for good quality content. Inevitably traditional spend such as display advertising and exhibitions will take a declining share of the budget and reviewing these can be no bad thing as often they will be a repeat of previous years rather than designed to achieve current objectives. 

How should the marketing budget be apportioned?

Marketing budgets are under pressure, but what share should go on the various communications methods?

Most marketers would advocate a broad range of marketing tools both offline and online. Some experts suggest headline rules such as you must be doing at least 8 marketing activities to succeed. One guru draws a circle, divides it into 3 equal sectors then propose one third of the budget goes on the web site, another third on advertising and the remaining third on everything else. An agency I worked for  advocated two ways of establishing a budget. The first, 'to cost the need' was the idealistic method of dominating the media, the other to set a figure  based on a percentage of turnover then adjust the level of activity accordingly.

 Rarely do companies have a proper marketing budget when we become involved. A marketing plan, budget corporate identity and delegation of authority to marketing to implement the plan and invest the budget are all important things to have in place. Usually the budget is reverse engineered from actual expenditure and once established tends to act as a benchmark for future years. Often there are two big ticket items that stand out - advertising and exhibitions. The latter usually understated merely recording the actual costs of space and stand design. If the true costs were accounted for - product, time, travel, hotels, entertaining - then it might seem a lot more expensive than it appears. How many companies relate enquiries to attendee numbers to the total population of their market? The ratios are probably depressing. A small percentage of the total market population will attend, not all these will visit the stand and a small percentage will lodge a useful enquiry. So why do companies like exhibitions? Exhibition space must be some of the highest real estate square footage in the world, yet the cost is rarely queried or negotiated. Yes, it provides face to face meeting opportunities, but once the tyre kickers are eliminated that personal contact might have been less expensively achieved with a good lunch.

Traditional display advertising remains equally popular and sacrosanct although if an advertising agency is involved at least the space cost is negotiated. The fact is that advertising and exhibitions absorb typically more than half the budget. So everything else has to be funded from the residue. Perhaps rather than tweaking budgets year to year it is time for a radical overhaul.